Difficulty getting loan for foreclosed condo with no HOA

cscowAugust 8, 2012

We are in the process of purchasing a foreclosed condo which is a second home/ vacation property for us. The condo development is 8 units and the development was foreclosed by the builder. All of the units have been sold and we purchased the last one. To date, the bank is still in charge of the HOA and the homeowners have not taken over. Due to the fact that there is no current HOA in place, we are unable to get a conventional loan and have to get financing through a local bank that is a balloon with a high interest rate and high closing costs. Has anyone else been in this situation? Any suggestions or are our hands tied? We are hoping to refinance once the HOA is established, but then we have to pay closing costs again.

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Billl

You probably won't like this, but my suggestion is to not buy a condo in that situation. The major banks won't lend to you because you are exposing yourself to completely unknown and possibly massive future costs. Any deferred maintenance, big bills etc are going to get passed on to the new condo owners once that association is up and running.

    Bookmark   August 8, 2012 at 12:41PM
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brickeyee

Run the other way.

    Bookmark   August 8, 2012 at 4:30PM
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cscow

Thank you for your responses. The condos are brand new and appear to be maintained. I am going to have the realtor check if there are any outstanding maintenance costs lingering that could be passes on to the homeowners.

    Bookmark   August 8, 2012 at 5:45PM
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marie_ndcal

I would suggest you have a lawyer review this situation, beside the realtor.

    Bookmark   August 8, 2012 at 10:42PM
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brickeyee

There is a bunch of stuff even an attorney will not be able to discover, especially with the builder still being involved.

Find another place.

    Bookmark   August 9, 2012 at 9:52AM
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GreenDesigns

This is such a bad idea on so many levels.

Don't get stubborn here because you've already become sentimentally attached to this place. Look at this objectively. There are more similar fish in the sea for which you will be able to get a reasonable mortgage approved. Move along to something better. It IS out there.

    Bookmark   August 9, 2012 at 11:19AM
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berniek

See if the builder will rent the unit to you for 6 to 12 months, with the option to purchase once issues get resolved.

    Bookmark   August 9, 2012 at 1:59PM
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cscow

Are all Condos a bad investment or just one in the described situation? Also, if we obtain a 6(d) certificate (certificate of no outstanding common charges) from the bank will we be protected from the hidden costs mentioned above? I do not think the bank will rent to us as they have back up offers on the unit. I know that Fannie May had tightened up its rules on lending for condos. Has this impacted resale for anyone?

    Bookmark   August 9, 2012 at 2:30PM
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cscow

Are all Condos a bad investment or just one in the described situation? Also, if we obtain a 6(d) certificate (certificate of no outstanding common charges) from the bank will we be protected from the hidden costs mentioned above? I do not think the bank will rent to us as they have back up offers on the unit. I know that Fannie May had tightened up its rules on lending for condos. Has this impacted resale for anyone?

    Bookmark   August 9, 2012 at 4:11PM
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brickeyee

"Are all Condos a bad investment"

Often.

They can be adequate residences, but just about anything single family goes up faster.

You cannot even get a mortgage in many cases if there are more than X% rentals in the condo.

That should be a tip off.

    Bookmark   August 9, 2012 at 4:16PM
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RooseveltL

Is condo in FL? Or high risk area?

You must consider if you have difficulty now whether the same challenges will surface in the future?
Also, have you confirmed insurance HOA 6 I think as many lenders require it and if you are unable to get it you will be stuk with high price mortgage and get stuck with that lender?
Possible to talk or share with other owners on their situations?

    Bookmark   August 9, 2012 at 9:49PM
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